Here at PB.com, we are eagerly awaiting tomorrow's Supreme Court decision in Free Enterprise Fund v. PCAOB. We were very interested to note SCOTUS blog's Tom Goldstein's prediction that the statute will be going down:
At this time of year, it becomes possible to predict the likely authors – and therefore the likely outcomes – of decisions. By tradition, the Court attempts to evenly distribute majority opinions, both within individual “sittings” and across the entire Term. At the end of the Term, it often becomes apparent that some of the remaining cases logically must have been assigned to particular authors.
The next longest-outstanding case is Free Enterprise Fund v. Public Company Accounting Oversight Board, which is the only remaining case that was argued in December. This is a harder call because neither the Chief Justice nor Justice Kennedy has authored an opinion from that sitting. I think that the Chief is a more likely author, however. In December, Justice Kennedy would have been working on not only his October and November opinions, but also the Citizens United campaign finance ruling, which was argued in a special September sitting. The Chief is also unlikely to leave himself without an opinion in a sitting.
If I’m right, that means that the PCAOB’s structure is likely to be invalidated as unconstitutional. At oral argument the Chief Justice asked no questions of counsel to the plaintiffs and was hostile to the defense of the statute, asking numerous questions. For example, he explained: “So you have got ‘for cause’ squared, and that’s – that’s a significant limitation that Humphrey’s Executor didn’t recognize and Morrison didn’t recognize.”
I therefore predict that the Court will reverse in Free Enterprise Fund, holding the structure of the PCAOB unconstitutional.
Let's remember one key fact about the Sarbanes-Oxley statute: It has no severability clause. Of course, this doesn't mean that the who Sarbox statute would fall. Sometimes the Court sends the severability issue back to the lower courts. And sometimes the Court decides Congress intended the statute to be severable even if there is no express severability clause. The question is one of legislative intent: Would Congress still “have passed” the statute “had it known” that the remaining “provision[s were] invalid”? Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 506, 105 S.Ct. 2794, 2803, 86 L.Ed.2d 394 (1985). I feel fairly confident in predicting that whatever happens in the narrow issue tomorrow, the rest of SOX will remain standing...at least for now.
